A key crossbench senator has lashed the federal government's proposal to toughen work-for-the-dole requirements as bordering on exploitation and called for ''proper'' industrial relations reform instead.

Liberal Democrat senator David Leyonhjelm has told Fairfax Media allowing young job seekers to negotiate salaries lower than the award, and to strike individual contracts would be a better way of getting them into work.

The New South Wales senator has hit out at the government's proposal to make job seekers apply for a "job in the morning and a job in the afternoon", describing it as "close to exploitation''.

Family First senator Bob Day and LDP senator David Leyonhjelm disagree with a government proposal to force the unempoyed to apply for 40 jobs a month. Photo: Alex Ellinghausen

The government does not need parliamentary approval for the vast majority of its expansion of the work-for-the-dole scheme, but has already signalled it may compromise on the requirement that job seekers apply for 40 job applications, following criticism from the business and social services sectors.

Prime Minister Tony Abbott on Wednesday said the government believes looking for work should be a "full time job" but noted the measures are "still subject to consultation".

The government, however, will need parliamentary approval for another of its planned changes to welfare payments – the proposed ''earn or learn'' scheme.

Under the proposal, people under 30 will have to wait six months before qualifying for the dole and those under 25 will only receive the lower-paying Youth Allowance benefit.

Those on the dole will also have to perform 25 hours per week on the work-for-the-dole scheme.

Senator Leyonhjelm said until he had seen the legislation he could not declare his final position but has warned he does not like the six-month waiting period being proposed.

He said the system as it stands is "making it impossible for youngsters to get into the jobs market" and hoped the government would "give ground" on "proper IR reform" instead.

However the government is unlikely to reinstate Australian Workplace Agreements because it has repeatedly promised it would not bring back WorkChoices.

Business and some within the government want workplace agreements restored, because they existed before Workchoices, but Tony Abbott has so far resisted pressure to reinstate AWAs.

Senator Leyonhjelm says another, and more viable, approach could be allowing young jobseekers to "opt-out" of the awards system for a start-up trial period.

"You could have an opt-out system and allow under-30s to opt out for a limited period perhaps for six months," he said.

Senator Day of Family First has also called for IR reform and described the plan to make people apply for 40 jobs per month as "nuts and insane".

"Forcing people to apply for jobs that they can't get but not allowing them to apply for jobs that they can get [through individual negotiations], I think is going about the whole thing the wrong way," he told the ABC's Capital Hill program.